New Delhi: Cube Highways, one of India’s largest private sector operators of toll roads, has emerged as the likely winner to acquire the road assets of National Investment and Infrastructure Fund’s (NIIF) Athaang Infrastructure, two people aware of the development said. The deal is expected to have an equity value of around ₹4,000 crore.
Canada Pension Plan Investment Board (CPPIB), the other final bidder, too had submitted a binding bid for the deal run by JP Morgan. Cube Highways will now be given exclusivity to close the deal for the portfolio of five road assets totalling 230 km.
Mint had earlier reported that CPPIB and Cube Highways were the finalists, and were expected to submit their final binding bids.
“Cube Highways and CPPIB had submitted the binding bids. Of the two, Cube Highways has emerged as the front-runner. The plan is now to give exclusivity to Cube Highways to close the deal,” said one of the two people cited above, requesting anonymity.
The Economic Times had earlier reported about up to 10 global and domestic infrastructure funds including CPPIB, KKR, Spain’s Abertis, France’ Vinci Highways, Edelweiss’ Sekura Roads and Caisse de dépôt et placement du Québec (CDPQ) signing non-disclosure agreements (NDAs) for the deal.
Spokespersons for CPPIB and JP Morgan declined comment. Spokespersons for NIIF and Cube Highways didn’t respond to queries emailed on Monday evening.
Singapore-based Cube Highways and Infrastructure Pte Ltd operates highways totalling 8,400 lane km in India. Its investors include I Squared Capital, Abu Dhabi Investment Authority, International Finance Corp., and a consortium comprising of Mitsubishi Corp., Japan Overseas Infrastructure Investment Corp. for Transport and Urban Development, East Nippon Expressway Co. Ltd and Japan Expressway Co. International Ltd.
Experts say that with the Indian road sector maturing, there are assets in play.
“The significant buildout in the road sector over the last decade has created a substantial inventory of assets. These mature and revenue-generating projects are now increasingly changing hands, as investors seek to capitalize on the steady returns and developers look to reinvest in new opportunities,” said Jagannarayan Padmanabhan, senior director and global head of transport, logistics and mobility at Crisil Ltd.
Slowing highway awards
The investor interest comes in the backdrop of a highway awards expected to slow to 8,000 km in the current financial year, as compared to 8,581 km in last fiscal, according to Crisil Ratings. However, the government has front-loaded its ₹2.72 trillion capital expenditure in FY25 for road and highway construction.
“Revenue growth of road engineering, procurement and construction (EPC) companies is expected to moderate to 5-7% next fiscal, as lower national highway awarding weighs on their order books,” Crisil Ratings said in a 27 August statement.
“There are multiple reasons for this slowdown spanning from procedural issues linked to the approval of cost estimates of projects and restrictions under model code of conduct before elections to transition-linked issues as the government explores build-operate-transfer (BOT) toll model for future projects in addition to its currently dominant modes of EPC and the hybrid annuity model (HAM),” the Crisil Ratings statement said and added, “Consequently, the order books of road construction companies is seen declining to ~2.0 times their annual revenue by the end of this fiscal from 2.3 times at the end of last fiscal and 2.6 times in fiscal 2023. This, in turn, will slow their revenue growth in this fiscal and the next.”
NIIF is sponsored by the Indian government, which holds a 49% interest in it. It primarily focuses on investing in core infrastructure sectors such as transport, airports, ports, logistics and roads, green energy and digital. It manages around $5 billion of equity capital commitments across its three funds—Master Fund, Fund of Funds and Strategic Opportunities Fund—with investments in sectors such as ports and logistics, renewable energy, roads, digital infrastructure, and manufacturing.
The other significant NIIF deal in play is the one for acquiring a majority stake in Ayana Renewable Power Pvt. Ltd, in what will rank among the largest transactions in India’s green energy space. Mint reported that state-run Oil and Natural Gas Corp. (ONGC), JSW Group’s JSW Neo Energy, and Singapore’s Sembcorp Industries Ltd have been shortlisted to submit the binding bids for acquiring a significant majority stake in NIIF-backed Ayana Renewable Power Pvt. Ltd. These firms had submitted their non-binding offers (NBOs) for the deal having an equity value of around $800 million, and are presently conducting due diligence for the company that has a 5 GW portfolio of operational and under-construction projects. The sale process is being run by Standard Chartered. Ayana is looking to sell significant majority stake in the green energy firm, that may translate into up to 100% stake sale.
